The Central Bank of Nigeria (CBN) derives its mandate from the CBN Act of 1958. Section one of the CBN Decree No. 24 of 1991, stipulates that the principal objects of the Bank shall be to issue legal tender currency in Nigeria; maintain external reserves to safeguard the international value of the legal tender currency, promote monetary stability and a sound financial system in Nigeria, and act as banker and financial adviser to the Federal Government (CBN, 2006). Therefore the central bank is the principal monetary authority.

Agriculture in the context of the economy is tied with the various sectors and is essential for generating broad based growth necessary for development. Agriculture is fundamental to the sustenance of life and is the bedrock of economic development, especially in the provision of adequate and nutritious food vital for human development, the sector is a catalyst and major source of raw materials for the industrial sector and provides most of the staple food consumed by the 120 million Nigerians. Although developments in the oil sector have dominated Nigeria's economic scene since the mid-1970s, the country remains basically agricultural. More than 70 percent of its population depends on agriculture, which contributes roughly 25 percent of GDP and 60 percent of non-oil exports.

Monetary policy facilitates the establishment of agricultural businesses through availability of credit and finance for start-up, investments, and expansion. The CBN controls the availability of credit through monetary policy instruments. These instruments affect agricultural output through agricultural banks and other financial institutions. Therefore, in our study of agricultural output monetary policy is a very important factor.

1.2 Statement Of The Problem

Before the rapid rise in oil export revenue, Nigeria was a major exporter of agricultural produce, especially cocoa, groundnuts, cotton, palm oil, palm kernel, and rubber. Since then however both the volume and the range of agricultural exports has declined sharply and agricultural imports have increased dramatically.

In addition, Nigeria no longer produces sufficient food for the country's large and rapidly growing population. The average annual rate of real output growth for food crops fell to about 2 percent a year during the 1970s. Between 1970 and 1975, however, the output of export crops dropped 17percent, the food import bill rose more than 10-fold in 1970-1980.

Low agricultural output has a negative effect on the economy as a whole, there is a low production of goods for food and raw materials for industries. A major challenge facing Nigeria is the inability to capture the financial services requirements of farmers and agribusiness owners who constitute about 70 percent of the population. Farmers need access to capital to purchase land and equipment and to invest in the development of new products, services, production technologies and marketing strategies. Yet banks are often reluctant to lend money to farmers for agricultural enterprises due to the lack of creditability and collateral.

Therefore there is need for a research in order to effect necessary changes because activities of the monetary authorities through monetary policy affect the financial institutions and credit availability to the agricultural sector in no small measure this will further affect agricultural output positively.

1.3 Scope of Study

This research seeks to study agricultural output and the how monetary policy affects it. The study shall be made using secondary time series data, for a span of 26 years that is from 1980 to 2006 which is sufficient and suitable for conducting a research, making new findings and relevant recommendations.

1.4 Objectives of Study

The main objectives of this research are as follows:

1) To identify the monetary policy instruments used to support the agricultural sector.